Report Panama Port Development Investment Opportunities in the Maritime Sector 2017 Embassy of the Kingdom of the Netherlands in Panama | Embassy of the Kingdom of the Netherlands in Panama | Embassy of the Kingdom of the Netherlands in Panama | Embassy of th lines navigate their global shipping routes. This has already born fruits as the expansion has led to an impressive increase in the ‘Hub of the Americas’ aggregated volume handled: the expanded Canal has registered an increase in tonnage of 23% in its first year after expansion, Over the past decade, Panama’s strategic location and its while its revenues increased 12.5% during the same period of integration into the world economy have converted the country time. into the fastest growing economy in Latin America and the Caribbean; transforming it into the ‘Hub of the Americas’. The The continuous developments around the Canal present country seeks to continue being competitive by amplifying challenges for which Dutch expertise can provide solutions. services and forming clusters to improve the interconnectivity Within the maritime sector six central developments can be between all sectors. In the government’s five-year plan for 2015- identified: 2019, a total public investment of USD 6.4 billion in transport 1. Peak hours and logistics has been indicated, of which USD 109 million will 2. Automation specifically be invested in maritime infrastructure. 3. Sustainability 4. LNG Market Furthermore, Panama has recently established diplomatic ties 5. Agro-logistics with China, the second biggest user - after the US - of the 6. Maritime Auxiliary Services Panama Canal. As it is expanding its global trade ambitions with its ‘One Belt One Road’ infrastructure-building initiative, The expansion of the Panama Canal has led to the establishment access to the eastern coasts of both Latin America and the US is of new projects in the maritime sector, thus creating business expected to be of growing importance for Beijing. opportunities for Dutch companies. This report provides an overview of the projects currently being developed and carried In June 2016, the largest infrastructure project since the Panama out by the Canal Authority (ACP), the Maritime Authority of Canal’s opening in 1914 was completed. The $5.25 billion Canal Panama (AMP) and other projects and the opportunities they expansion has tripled its capacity and changed the way shipping provide for Dutch business. Table of Contents Caribbean. Average annual growth has been 7.2% between 2001 and 2013; more than double the regional average. Growth reduced slightly to a percentage of 5.4 in 2016. By 2017 the ‘Hub of the Americas’............................................................. 1 forecast remained at 5.4%1.In the medium term, Panama’s Table of Contents ................................................................. 2 growth is likely to remain one of the highest in Latin America, 1. Introduction ..................................................................... 2 between 6 and 6.5%. Public investments are also likely to remain high, owing to the construction of the second metro line and 2. The Bigger Picture ............................................................. 2 the additional traffic generated by the expanded Canal. In the 3. The Panama Canal ..............................................................3 government’s five-year plan for 2015-2019, a total public 4. Developments in the Maritime Sector ................................. 4 investment of USD 19,5 billion has been indicated. Transport and logistics have been named key sectors by this 5. China’s Increasing Influence .............................................. 6 administration, receiving a total public investment of USD 6,4 6. Panama’s Ports ................................................................. 6 billion of which USD 109 million will specifically be invested in maritime infrastructure2. Prospects for high growth in the 6.1 PSA Panama International Terminal ............................... 7 coming years are also supported by emerging opportunities for 6.2 Manzanillo International Terminal ................................. 7 private sector-led growth in key sectors, such as transport and 6.3 Port of Cristóbal .......................................................... 8 logistics, mining, financial services, and tourism. 6.4 Port of Balboa ............................................................. 8 The economy of Panama is centered on a highly-developed 6.5 Colon Container Terminal ............................................ 8 service sector, which represents more than 75% of gross domestic product (GDP). The Panama Canal and use of the U.S. 7. Opportunities for Dutch Business ...................................... 10 dollar strengthen the globally-oriented service economy. The 7.1 The Canal Authority (ACP) ............................................ 10 Panama Canal is essential to global trade and accounts for 7.2 The Maritime Authority (AMP) ...................................... 12 almost 10% of the country’s GDP. Other important components of the service economy are the Colon Free Trade Zone (CFZ), 7.3 Other Projects ............................................................. 14 which is the second largest free zone in the world. Panama also 8. Maritime & Logistics Events 2018 ....................................... 15 has a large logistics sector, as well as a modern banking- and insurance industry. The agricultural sector has lost importance 1. Introduction over the years, accounting for less than 3% of GDP today. The main cash crops produced in the country are bananas, corn, coffee and sugar. In this report, current business opportunities in the Panamanian maritime sector are identified. Firstly, a short introduction is given on the economic characteristics of Panama whereupon the Figure 1. Key numbers Panamanian economy. recently completed expansion of the Panama Canal and its • Panama has a GDP of USD 55.2 billion and a GDP per implications are discussed. Thereafter, six developments in the Capita of USD 12,140. maritime sector are discussed, followed by an overview of • The country was ranked 42th in the 2016 Global Panama’s five main ports. The report concludes with the current Competitiveness Index with an overall score of 4.51 on a 1- maritime projects and the opportunities this offers for Dutch 7 scale (low-high) . business. • Panama City was ranked 1st in the 2015 Doing Business in Central America and the Dominican Republic index by the World Bank. 2. The Bigger Picture • The country was ranked 40th in the 2016 Logistics Performance Index with an overall score of 3.43 on a 1-5 Over the past decade, Panama’s strategic location and its scale (low-high). integration into the world economy have converted the country into the fastest growing economy in Latin America and the 1 http://www.worldbank.org/en/country/panama/overview -2019.pdf 2 http://www.mef.gob.pa/es/Documents/PEG%20PLAN%20ESTRATEGI CO%20DE%20GOBIERNO%202015 2 Panama wants to develop itself into a regional hub, following, As the movement of container cargo increased globally, the amongst others, the example of Rotterdam, by creating a Canal Authority (ACP) decided to focus on this segment. Hence, multimodal infrastructure system integrating the Panama Canal, in 2007 the expansion of the 77-kilometer waterway began with five ports, multiple airports, railways and roads. The completion a total investment of USD 5.25 billion. Since its inauguration on of the Panama Canal Expansion has increased transshipment June 26, 2016, the expanded Canal increased the waterway's volumes handled by the logistics cluster in Panama, as well as capacity to meet the growing demand of maritime trade using adding new commodities like liquefied natural gas (LNG). In larger vessels, which means that the Panama route provides order to capitalize on the opportunities, it is of essential important economies of scale. importance for Panama to invest in the creation of added value services to fully benefit from the expansion of the Panama The Panama Canal Expansion has been the largest enhancement Canal. Therefore, the development of a logistic subsystem to project since the Canal's opening in 1914. The Expansion support the agriculture sector is high on the agenda as well. included the construction of a new set of locks on the Atlantic and Pacific sides of the waterway, thereby creating a third lane of traffic, doubling the cargo capacity of the waterway. While the 3. The Panama Canal expanded locks are 70 feet wider and 18 feet deeper than those in the original Canal, they use less water due to water-savings The Panama Canal is a key world trade route. Due to its basins that recycle 60% of the water used per transit. Before the favourable geographic location, the canal facilitates a unique expansion, the existing locks allowed the passage of vessels that connection for commercial maritime routes between the could carry up to 5,000 TEU. After the expansion, the Post- Atlantic and Pacific oceans. The Canal currently serves various Panamax vessels are able to transit through the Canal, with important trade routes within the region and with Asia and up to 13,000/14,000 TEU, thus multiplying the capacity by Europe, providing a significantly shorter transit between the nearly three times. According to the ACP, currently 15 out of the Atlantic and Pacific oceans than around the notorious Cape 29 liner services that transit through the Canal deploy Horn. Next to facilitating a